More Housing: Status report

Rentals

• Landlord compensation for not transitioning pre-1990 contracts to the New Urban Rental Regime (“NRAU”)

As we highlighted in our practical guide (see point 2.2. of Practical guide | More Housing Program), with the entry into force of the More Housing Law, landlords can no longer initiate the transition to the NRAU for residential rental contracts dated before November 18, 1990, that had not yet transitioned to the NRAU. For this purpose, a compensation mechanism was expected to be approved in 2024.

Consequently, Decree-Law 132/2023 of December 27 was published, establishing the following for these cases:

(i)                 The landlord compensation mechanism: This compensation may be granted if the monthly rent is less than 1/15 of the leased property’s taxable value (“VPT”), divided by 12 months.

(ii)               The rent limits for these contracts: The decree-law stipulates that the rent for these contracts cannot exceed the amount established on the date Decree-Law 132/2023 entered into force (i.e., December 28, 2023), except for adjustments based on the annual coefficient determined by the National Statistics Institute (INE).

How is landlord compensation calculated?

The compensation amount corresponds to the difference between the monthly rent due on December 28, 2023, and the amount equal to 1/15 of the property’s VPT, divided by 12 months. This compensation is exempt from personal income tax and social security contributions.

 Is the compensation awarded automatically?

No, landlords must request the compensation from the Housing and Urban Rehabilitation Institute (Instituto da Habitação e da Reabilitação Urbana, I. P. (“IHRU”) by (i) completing the form that has been available on the Housing Portal (Portal da Habitação) since July 1, 2024; and (ii) submitting the necessary supporting documents.

Under Decree-Law 132/2023 of December 27, the IHRU has 30 days to decide on the landlord compensation application, starting from the date the landlord submits it.

Compensation duration period

The compensation is granted for a 12-month period. It can be renewed for equal and successive periods, provided that, before the end of each period, landlords demonstrate to the IHRU that they still meet the compensation award requirements.

• Forced rentals

One of the measures included in the More Housing Law was that residential units for housing purposes or separate parts of a building that can be used for residential purposes could be subject to forced rental if they had been vacant for more than two years, and were not located in inland Portugal, Madeira, or the Azores—see point 2.3 of Practical guide | More Housing Program).

However, following the extraordinary meeting of the Council of Ministers of May 27, 2024, Decree-Law 43/2024 of July 2 was published, revoking the extension of the forced rental regime to vacant residences. Effective from July 3, 2024, this decree-law expressly revokes article 108-C on the forced rental of vacant residences that the More Housing Law had introduced into the Legal Regime for Urbanization and Building (RJUE).

One of the measures established in the More Housing Law regarding short-term letting was the creation of an extraordinary annual contribution for apartments and accommodation establishments within a separate part of a building used for short-term letting (“CEAL”)—see point 3.6 of the Practical guide | More Housing Program.

The CEAL tax would be based on a rate of 15% and two coefficients to be published annually: (i) the economic coefficient for short-term letting, and (ii) the urban development pressure coefficient for the gross private area of residential properties.

Under the CEAL regime established in the annex to the More Housing Law, the contribution should be settled using the official declaration form, to be approved by an ordinance of the member of government responsible for finance. The declaration was to be submitted by June 20 of the year following the taxable event, with the obligation to pay the contribution by June 25.

However, the ordinance establishing the official CEAL declaration form was not published. Moreover, on June 3, 2024, the government submitted Law Proposal 4/XVI/1 to parliament, granting legislative authorization to the government to revoke CEAL. The authorized draft decree-law accompanying the law proposal stipulates that the revocation takes effect from December 31, 2023. This law proposal has already been discussed in parliament and received final approval on June 21, 2024.

In this context, on June 14, 2024, the Secretary of State for Tax Affairs issued Order 30/2024-XXIV, which extended the deadlines for submitting the CEAL settlement declaration and paying the contribution (June 20 and June 25, respectively) by 120 days.

Therefore, the CEAL settlement obligation has been extended, with the expectation that the law granting legislative authorization to the government to revoke the CEAL will be signed into law and published, along with the above government decree-law.